How Realistic Is Free Trade in the Real World? Essay

Nowadays, virtu all in ally virtually every country in the conception has once engaged in cope activities payable to the self-evident benefit it rear end bring. Besides, un chuck up the spongeze cope activities argon also being encouraged in all over the world. However, along with these benefits, at large(p) trade in in fact brings plenty paradoxs, especially for the ontogenesis countries. This study will discuss the advantages and disadvantages of free trade in growth countries, and brook a bearish speckle of view in the global return and development in the future.It is nothing but a guileless activity that involves two or more countries engaging in the exchange of goods and serve. Such exchanges of goods or run screwing be between two parties or several parties. Based on trade, heap in some countries could gravel a groovy descend of opportunities to select a wide range of products and services originated from every country roughly the world. Additionally , it improves not solo the terms of trade but also the scotch health of each country.Most academic economists agree and accept the obvious surmisal that trade benefits both(prenominal) parties involved in the transaction. Trade is a concept that exists largely due to the differences in the cost of achievement of some tradable commodity in the various locations (Zaidi, Kadiwala). Nevertheless, a few countries do not believe in the benefits of trade, they keep pursuing conservative policy and isolate itself from global integration such as brotherhood Korea. Along with Trade, at that place is another term which needs to be clarified Free Trade. fit in to Athony Carter, Free trade refers to the right to sell goods and services around the world without any hindrance. With free trade the barely thing determining the price of items will besupply and demand factors. As hygienic as goods and services, free trade can also refer to the ability of labor to move freely around the world . The main aim of free trade is to carry out development to improve the gentlemans gentleman welf argon. With free trade, the performance will have the lowest cost and the intake will have the cheapest price.Hence, there are enormous benefits of free trade such as increase in stinting growth, warring advantage, economics of scale, etc. However, along with these benefits, free trade in fact brings plenty problems, especially for the evolution countries (M. Suparmoko 2002). Although developing countries have become more integrated significantly into the trade world recently, their integration is lock in not in right directions, has failed to provide many of the expected benefits.Competing perspectives about the role and impact of trade in developing countries Admittedly, Free trade is an issue of great importance for those in business and consumers around the world. The issue of free trade is a highly contentious one, and both sides of the debate can provide persuasive arguments for their position (Anthony Carter). The existence of free trade around the world is hindered in many diverse ways. Most countries will have tariffs on at least some imports, and this tax can give way these good less competitive.The usual reason why a government will impose this fount of tax is that they destiny to protect local industry or dissuade sight from purchasing trusted products the governments also use tariffs to raise funds. Of course there are also a lot of limitations on the free movement of labor (Anthony Carter). Fundamentally, there are three main schools of thought which will authorize for the both sides of the debate neoclassic approach, Structuralists, and dependency Theory. This essay will apply the three theories mentioned above in order to demonstrate the two arguments for and against Free trade in developing countries.While Neoclassical theory suggests that all free trade is eventually mutually beneficial to everyone welfare, habituation Theory adv ocates argue that free trade is a noisome force and a threat to the evolution World or the least Developed Countries. Structuralists extend to their position in the shopping mall ground and acknowledge that while there are gains from free trade to be made for the Least Developed Countries and Developed Countries alike, free trade is potentially harmful to developing economies and needs to be managed appropriately (James Lawrie).Neoclassical Theory Basically, Neoclassical principals can be traced back to the three models Adam Smiths Absolute advantage theory, David Ricardos theory of relative advantage and Hecksher-Ohlin model as well. Adam Smith explained that all trade is mutually beneficial by means of Absolute advantage and David Ricardos theory of Comparative Advantage. These ideas were soundly strengthened upon by the Hecksher-Ohlin model.The H-O model explains how free trade between terra firmas enhances a populations welfare by allowing a nation to employ its various factors of production (land, labour & capital), more effectively (James Lawrie). fit to James Lawrie, The H-O model assumes that through the combination of peculiarity in the production process and free trade between nations, the participating nations can raise their consumption beyond their domestic Production Possibility Frontier, thus increasing the overall welfare of said nations populations.This happens due to the fact that specialization in goods that a nation has comparative advantage in means that this nation can produce them at a lower opportunity cost than that of its trading partners. According to Neoclassical theory, the LDCs (least developing countries) should specialized labors intensive goods. Because these countries have high abundance of cheap labour more than other factors endowment. These countries can use labour intensive goods to exchange and traded capital intensives goods from developed countrie, typically westward nations.Both of two countries also mutu ally benefits from trade. In addition, another supporting argument of the H-O model, for LDCs adopting free trade, is the predicted effects of Factor Price Equalisation. The costs of the abundant factor within a nation should leaven as demand for this factor increases. As a result, the wages for workers will gradually rise, eventually atomic number 82 to domestic and international equality. H-O model such as the tool to help LDCs to apply export oriented industrialisation (EOI) as a means for development (James Lawrie).Nevertheless, in practice, H-O model has neglected several significant factors, such as improved resource allocation due to the price mechanism, access to better technologies, inputs and mediate goods, economies of scale and scope and greater domestic competition as benefits of a free and open commercialise place. 2. Dependency Theory In contrast with the Neoclassical theory, Dependency Theory provide a number of convincing arguments against Free trade in develop ing countries. One bvious criticism is that Neoclassical theory has been built and developed almost entirely by Western economists who have a bias towards every problem from a western point of view.For instance, in the past, the British Empire and its colonies achieved growth through exporting, but the like conditions are not in common nowadays. As well as this, according to this theory, LDCs and Developing countries do not have access to technological advance originated from Developed countries, typically, Western countries and United States of America. accommodate Cambodia as an illustration for this point of view, this country has a automobile-making industry, which means they can manufacture automobile however, these cars are produced under old-fashioned technology. It represents the fact that, they can produce as many cars as they want, but these cars can not keep up to the latest advanced technology prevailing in the world. Besides, there are other several factors which can h ave negative impact on LDCs and Devloping countries if they engage in free trade activities.For example, the Developed countries would also benefit from a greater deal of political and economic muscle when negotiating terms of trade (James Lewris). In addition, Dependency Theory finds free trade cause poor exchange and uneven development, arguing that without extensive state support the dual economy will only widen. MNCs are of particular concern to Dependency Theory for this reason as they repatriate the net made by their activities in foreign countries much like BP drilling for oil in the Niger Delta.Dependency Theory discovers a trickle up effect, which means, money flowing from poor countries to the richer Developed countries. Moreover, Dependency asserts that Developing nations has to suffer from environmental damage caused through such operations and workers from Developing countries endure a lowering of health and safety standards, whereby nations must lower regulations an d standards to remain their competitive position (James Lewris). 3. Structuralists theory afterward examining the two schools of thought mentioned above, this paper will deliver the last theory, which is considered to be developed in the middle of the two theories.It is not in favor of every benefit coming from free trade, but it is not against entire free trade. It suggests that import substitution industrialization (ISI) is the musical noteping stone simple manufactured goods the next step is developed to export orientated industrialization (EOI). It believes that free trade is good but free trade needs to be processed and managed in a proper manner. IV- Why we might be negative about the prospects for global growth and development in the future? According to Wenglert & Rosen (2000), the re search shows that people tend to be more pessimistic from their views on the world status.Political and social instability, climate change, patronage pecuniary crises, natural resources exhaustion, between countries and widening income inequalities are significantly serious problems that the world are facing. A number of academic researchers attempt to find out the causes of these concerns in order to establish the most effective solutions. However, the facts and figures originated in every study appear to be far from expectation. First of all, significant problems facing the world today are climate change and alternative energy.High speed of industrialization and urbanization has raise environmental pollution and the degradation of natural resources. Natural disasters are seen more often and more destructive with more floods, less rain due to global climate change which caused by environment pollution. According to World Resources Institutes, in 2000, the world emitted more than 9,000 million tons of CO2 but it is estimated to increase by 57% to over 14,000 million tons by 2025. Air pollution and greenhouse gas make global temperature changes to rise and ice cra cking in North Pole together with sea-level ascending are disappointing results of global warming.This graph will demonstrate the considerable rise in sea level from 1870 to 2010. Climate change has led to increasing natural disasters in many countries which have killed millions of people and caused huge amounts of economic losses for this decade earthquake in China, Chile and the most recent berth is in Japan, tsunami in Thailand, Indonesia and so on.Simultaneously, the current pattern of unsustainable use of natural resources has seriously threatened the growth prospects in the future. Price of energy products such as oil, gas, coal etc. ecomes higher and higher. It means industrial products, mainly from developed countries, more expensive and people in developing countries fail to afford. Besides, social issues have become increasingly complicated and resulted in a wide range of serious concerns for not only related countries but also the world as a whole. For instance, we shou ld take into account hunger, meagerness, health care, and procreation as major problems. In the twentieth century, the world population has grown drastically (from 1. 6 one thousand thousand by 1950 to 6 billion by 2000).Most of the increase was in developing and poor countries, creating difficult constraints on their growth and development because more people require more provision of primary goods and macrocosm services (World Bank, 2010b). Moreover, poverty itself is a barrier to development because of limited capacity of credit and insurance markets (Rodrik, 2009b). Additionally, poverty usually comes together with poor healthcare, limited access to education, widening inequalities of living standards and social, even political instability.Furthermore, economic and financial crisis happens more frequently, threatening global growth and development. Since the early 1990s, the world has witnessed a series of financial and economic crises such as in Thailand, Korea, Turkey, Ar gentina (Salvatore, International Economics), and most recently in the fin high-income EU countries (Greece, Ireland, Italy, Portugal and Spain) in 2010. The reason of the most recent fiscal crisis is attributed to the very high government deficits and debt levels (115% of gross domestic product in Greece in 2009).Severely, the crisis has caused great volatility in global financial and commodity markets. The steep freeze off in stock markets worldwide have shown market nervousness concerning the uncertainty of developments in Europe. Fortunately, it is reported that developing countries have not been affected much by the crisis as they are still growing with great expansion of industrial production and trade. Lastly, failure of Doha Round is a clear evidence for pessimistic futures of global growth and development.Large countries attempt to persuade developing countries to open their economies but they still want to keep their own benefits and do not want to share their wealth. Th e conflict benefit between developing countries and developed countries made Doha round stopped. Doha agenda is ill conceived from the start. V Conclusion In brief, the expected result of free trade is very good in theory, but in worldly concern it can be a tragedy of the developing countries. Free trade or globalization can be possible if countries do not establish their overriding goal as protecting themselves, so in fact real free trade may be a myth. In ddition, with many risks and serious issues mentioned above, the global growth and development will encounter a slowdown process or even non-existence in the future if unexpected incidents take place continuously.